EU heads towards loans deal for stricken Greece

11 April 2012

European Union finance ministers were meeting this afternoon to discuss how they might provide loan guarantees to help Greece extricate itself from its financial crisis.

The EU's executive today said it was ready to propose a "framework" for a debt package despite the reluctance of France and Germany to promise resources.

The electorates of both countries, particularly Germany, are extremely loath to give or lend any money to a country widely seen as profligate and mired in corruption.

Although there has undeniably been progress on reaching a loans deal, officials were keen to play down speculation at the weekend that a figure in the order of 25 billion (£22.7 billion) would emerge for the amount of money to be extended.

"No political decisions will be made," said a German government spokesman.

He also welcomed the Greek government's austerity pledges, including big cuts to public sector pay and tax rises.

Conscious of public opinion in their countries, Germany and France have repeatedly stressed that Greece may not need to draw on any bailout deal.

However, many economists seem to think it unlikely that Greece can pull out of its crisis alone. German bonds have fallen heavily in recent sessions amid expectations that it will bear the brunt of a big bailout package.

Greek prime minister George Papandreou has said he will cut the country's debt from 12.7% of GDP to 8.7% this year by cutting 4.8 billion from the country's budget. A poll yesterday showed a majority of Greeks think the austerity plan is a good idea although the country has been hampered by strikes from public and private sector workers.

This afternoon's meeting was not to discuss details of the funding for a European Monetary Fund — a proposed local version of the International Monetary Fund to help eurozone countries with debt problems.

The fact that talks appeared less advanced than the weekend newspaper speculation suggested saw the euro fall against the dollar today.